Broadband Cable Association of Pennsylvania


April 3, 2013

Every American in his own way will mark the occasion of Julius Genachowski's stepping down from the Federal Communications Commission. Some will light candles. Some will adjust themselves slightly in their seats and say "Who?"

Mr. Genachowski, as all retiring bureaucrats do, says he's leaving his bailiwick in fine shape. He can hardly be heard, though, over the moaning of Washington's broadband policy circus. Charges fly hourly that Google, Netflix, Comcast or some other company is guilty of gross insult to net neutrality (that sacred principle nobody can define). Oregon Sen. Ron Wyden has introduced legislation to regulate data caps and Internet pricing. Law professor Susan Crawford, until recently a White House technology adviser, clearly craves to be America's next go-to talking head on broadband. Lately she's been everywhere calling for a crackdown on the competing "monopolists" who supply Internet access. A second factor is uncertainty over the future of TV, which paid for so much of America's broadband rollout to date. The showstopper in a word: Netflix. Still, in typical fashion, cries of "broadband stagnation" are bubbling into public awareness just as these worries are becoming obsolete. In fact, animal spirits are stirring again.

In the latest federal survey, the average broadband speed in America is up to 15.6 megabits per second, from 14.3 a year earlier. Nearly half of customers who six months ago made do with one megabit or less have now moved up to higher speeds. Since 2009, the U.S. has gone from 22nd fastest Internet to the eighth fastest. Or look at Intel: Its forthcoming over-the-top TV product, which has set the tech industry a-twittering, is a bet not only on growing bandwidth availability but also on the inability of cable-like incumbents to block new TV competitors. Look at cable pioneer John's Malone's big new investment in Charter Communications. Charter's CEO Tom Rutledge hardly fulfills the stereotype of the cable CEO who wants to deprive his highly profitable broadband customers of faster speeds in order to protect his barely-breaking-even TV business. As Mr. Rutledge explains in every meeting with investors, he loves it when his customers use bandwidth-hogging services like Netflix-"the more the merrier"-because it accentuates cable's superiority over satellite.

According to the Information Technology and Innovation Foundation, 20 million miles of fiber were laid in America last year. just announced it will taper down its stock buybacks in order to pay for more broadband investments. The day may come when even Verizon, which visibly soured on its $23 billion FiOS bet, rediscovers an urge to invest in fixed broadband infrastructure to meet growing consumer lust for hi-def services. The net neutrality crazies and other Washington attention-seekers like to rail about the supposedly exorbitant profits cable operators are minting on their built-out broadband systems. The critics exaggerate but they might also ask themselves: Don't we want broadband to be profitable in order to attract investment? The crazies might also notice that data caps, or what is properly called "price discrimination," is the opposite of anticompetitive. It's what fiercely competitive businesses (e.g., the airlines) do to turn non-customers into customers to help defray a network's fixed costs.

More fun than digging into the nitty-gritty, of course, is playing on stereotypes of evil, monopolizing corporations. Yet the standard rhetoric is not illuminating of any real problem. AT&T spent five years fighting lawsuits to install sidewalk utility boxes in order to bring its high-speed U-verse service to San Francisco. Only last summer did a judge finally clear the last obstacle. Google touts its Kansas City fiber project as somehow transforming the economics of broadband. But Google had hundreds of towns vying for its attention and naturally chose a city that waived the usual regulatory burdens, hassles and taxes that befall companies trying to wire a neighborhood. These same hassles, by the way, also inhibit the siting of new cell towers. A low-tech way to stir up broadband competition would be to relax the regulatory obstacles to the actual physical provision of broadband. Wall Street Journal

For years, Verizon and Vodafone have confronted a problem: what to do with Verizon Wireless, which they both own nearly equally? According to a new report, the answer may be simple - bring in Verizon's top competitor. The Financial Times's Alphaville blog said on Tuesday that Verizon and AT&T were teaming up to buy all of Vodafone. That would give the British telecommunications giant what the blog reckoned was a $245 billion enterprise value and would be one of the biggest takeovers in at least a decade.

The plan outlined by Alphaville - Verizon buying out Vodafone's 45 percent stake, while AT&T buys the rest of the British company - could solve the many issues that Verizon and Vodafone have been trying to figure out for years. And it would solve issues faced by Verizon and AT&T as well. Verizon has long wanted to take control of the profitable business. And Vodafone has sought to sell the 45 percent stake it owns - but at an acceptably high premium and without being hit by an enormous tax burden.

Every year like clockwork, speculation has arisen that Verizon and Vodafone have had talks about striking a deal over Verizon Wireless. And every year so far, nothing has come up. Last month, Bloomberg News reported that the two had again held talks, with Verizon remaining quite eager to take control of the wireless business. But bringing in the company's biggest rival could help out. AT&T has not pursued a big deal since the failure of its $39 billion bid for T-Mobile USA two years ago, and still has plenty of financial firepower, with nearly $5 billion in cash and short-term investments on its balance sheet.

Verizon itself has about $3.6 billion. And both American companies have healthy balance sheets that could support the additional debt needed to finance a major deal. Despite the collapse of the T-Mobile deal, AT&T has still sought to grow. With American antitrust regulators unlikely to let it buy anything of scale at home, AT&T has turned its eyes abroad for possible opportunities. Vodafone shareholders seem to like the idea. Its shares rose 5 percent on the London Stock Exchange on Tuesday, reaching 196 pence by midday. New York Times